The U.S. dialysis equipment maker must also end an outsourcing production deal in China with Japan's Nipro Corporation by March 31, 2016. The approval is subject to corporate monitors as well, the ministry said.

The conditional nod from China comes after Baxter secured EU regulatory approval on July 22, having pledged to sell off the CRRT business, including supply deals and intellectual property rights. The CRRT division accounts for about 2 percent of Baxter's renal product sales.

The deal, which Baxter announced in December last year, would make it the second-biggest manufacturer in the dialysis market, a sector set to expand in line with rising obesity and diabetes.

Baxter is buying Gambro from Swedish investment holding company Investor AB and its partly owned private equity company EQT.

China has approved mergers with conditions in many cases, but has only blocked one deal since its anti-monopoly law came into force in 2008. That was Coca-Cola's attempt to purchase juice maker Huiyuan in 2009.